Correlation Between CNL Capital and Wool Industry

Can any of the company-specific risk be diversified away by investing in both CNL Capital and Wool Industry at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining CNL Capital and Wool Industry into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CNL Capital EKES AIFM and Wool Industry Tria, you can compare the effects of market volatilities on CNL Capital and Wool Industry and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in CNL Capital with a short position of Wool Industry. Check out your portfolio center. Please also check ongoing floating volatility patterns of CNL Capital and Wool Industry.

Diversification Opportunities for CNL Capital and Wool Industry

-0.59

Correlation Coefficient

CNL Capital  Wool Industry

Excellent diversification

The 3 months correlation between CNL and Wool is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding CNL Capital EKES AIFM and Wool Industry Tria in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wool Industry Tria and CNL Capital is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on CNL Capital EKES AIFM are associated (or correlated) with Wool Industry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wool Industry Tria has no effect on the direction of CNL Capital i.e., CNL Capital and Wool Industry go up and down completely randomly.

Pair Corralation between CNL Capital and Wool Industry

Assuming the 90 days trading horizon CNL Capital EKES AIFM is expected to under-perform the Wool Industry. But the stock apears to be less risky and, when comparing its historical volatility, CNL Capital EKES AIFM is 8.36 times less risky than Wool Industry. The stock trades about -0.11 of its potential returns per unit of risk. The Wool Industry Tria is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  448.00  in Wool Industry Tria on December 27, 2024 and sell it today you would earn a total of  52.00  from holding Wool Industry Tria or generate 11.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

CNL Capital EKES AIFM  vs.  Wool Industry Tria

CNL Capital EKES

Risk-Adjusted Performance

Very Weak

Over the last 90 days CNL Capital EKES AIFM has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, CNL Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Wool Industry Tria

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wool Industry Tria are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Wool Industry unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CNL Capital and Wool Industry

The main advantage of trading using opposite CNL Capital and Wool Industry positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CNL Capital position performs unexpectedly, Wool Industry can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Wool Industry will offset losses from the drop in Wool Industry's long position.

The idea behind CNL Capital EKES AIFM and Wool Industry Tria pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..